Nairobi Real Estate - Sound Argument

samachel

Village Elder
#1
I've been in the real estate space for a few months now and I hear some interesting sentiments every day. People talk about a bubble in the real estate market, that it's all gone Pete Tong, comparing it to the financial meltdown in the US market (and subsequently worldwide) in 2008. I'm not saying they're wrong, but they're not right at all.

We all know what caused the crisis in the US. Extremely low-interest rates meant mortgages were widely available to many. These mortgages were bundled together to form new financial instruments called mortgage-backed securities which were sold low risk backed by credit default swaps insurance because everybody pays for their mortgage right? The mortgage lenders passed these on, the underwriting criteria used was crap, people defaulted and the economy was done out here.
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In Kenya, the uptake of mortgages is super super low and the interest rates aren't close to being pleasing so this can't be an issue. So what could we attribute the current situation to? Oversupply. Now, I don't have exact data but it is plain obvious that there's too much inventory in certain segments against much lower demand. We're already seeing price corrections in the residential market and I believe this will continue to be a trend for the next year or so.

The retail market in Nairobi has seen an incredible correction according to Cytonn's retail market report 2018. There's just too many malls so tenants can dictate better lease terms. It's no secret the kind of offers available now, first 6 months rent free and other short stories. In the commercial space we have a case of oversupply and none grade A office spaces commanding grade A prices, a correction is imminent. An unfriendly investor environment, low private sector lending, a perceived middle class that didn't exist are some of the reasons the demand just can't meet the supply.

This isn't exactly a bad thing. Developers and sellers expected the market to be at a certain point now but our economy hasn't helped the situation so supply has outstripped demand. Deals can still happen at this point, sellers have to be a bit more realistic and now is the time for buyers to open their chequebooks. It's effectively a buyers market and as a Real Estate salesperson I'm advising my clients on both sides of the aisle to be ready to deal, otherwise, a property will sit idle for too long.

The views in this article are by R.Gitonga
 

Pseudo

Village Elder
#2
I've been in the real estate space for a few months now and I hear some interesting sentiments every day. People talk about a bubble in the real estate market, that it's all gone Pete Tong, comparing it to the financial meltdown in the US market (and subsequently worldwide) in 2008. I'm not saying they're wrong, but they're not right at all.

We all know what caused the crisis in the US. Extremely low-interest rates meant mortgages were widely available to many. These mortgages were bundled together to form new financial instruments called mortgage-backed securities which were sold low risk backed by credit default swaps insurance because everybody pays for their mortgage right? The mortgage lenders passed these on, the underwriting criteria used was crap, people defaulted and the economy was done out here.
View attachment 218410
In Kenya, the uptake of mortgages is super super low and the interest rates aren't close to being pleasing so this can't be an issue. So what could we attribute the current situation to? Oversupply. Now, I don't have exact data but it is plain obvious that there's too much inventory in certain segments against much lower demand. We're already seeing price corrections in the residential market and I believe this will continue to be a trend for the next year or so.

The retail market in Nairobi has seen an incredible correction according to Cytonn's retail market report 2018. There's just too many malls so tenants can dictate better lease terms. It's no secret the kind of offers available now, first 6 months rent free and other short stories. In the commercial space we have a case of oversupply and none grade A office spaces commanding grade A prices, a correction is imminent. An unfriendly investor environment, low private sector lending, a perceived middle class that didn't exist are some of the reasons the demand just can't meet the supply.

This isn't exactly a bad thing. Developers and sellers expected the market to be at a certain point now but our economy hasn't helped the situation so supply has outstripped demand. Deals can still happen at this point, sellers have to be a bit more realistic and now is the time for buyers to open their chequebooks. It's effectively a buyers market and as a Real Estate salesperson I'm advising my clients on both sides of the aisle to be ready to deal, otherwise, a property will sit idle for too long.

The views in this article are by R.Gitonga
Well articulated.
 
#4
I've been in the real estate space for a few months now and I hear some interesting sentiments every day. People talk about a bubble in the real estate market, that it's all gone Pete Tong, comparing it to the financial meltdown in the US market (and subsequently worldwide) in 2008. I'm not saying they're wrong, but they're not right at all.

We all know what caused the crisis in the US. Extremely low-interest rates meant mortgages were widely available to many. These mortgages were bundled together to form new financial instruments called mortgage-backed securities which were sold low risk backed by credit default swaps insurance because everybody pays for their mortgage right? The mortgage lenders passed these on, the underwriting criteria used was crap, people defaulted and the economy was done out here.
View attachment 218410
In Kenya, the uptake of mortgages is super super low and the interest rates aren't close to being pleasing so this can't be an issue. So what could we attribute the current situation to? Oversupply. Now, I don't have exact data but it is plain obvious that there's too much inventory in certain segments against much lower demand. We're already seeing price corrections in the residential market and I believe this will continue to be a trend for the next year or so.

The retail market in Nairobi has seen an incredible correction according to Cytonn's retail market report 2018. There's just too many malls so tenants can dictate better lease terms. It's no secret the kind of offers available now, first 6 months rent free and other short stories. In the commercial space we have a case of oversupply and none grade A office spaces commanding grade A prices, a correction is imminent. An unfriendly investor environment, low private sector lending, a perceived middle class that didn't exist are some of the reasons the demand just can't meet the supply.

This isn't exactly a bad thing. Developers and sellers expected the market to be at a certain point now but our economy hasn't helped the situation so supply has outstripped demand. Deals can still happen at this point, sellers have to be a bit more realistic and now is the time for buyers to open their chequebooks. It's effectively a buyers market and as a Real Estate salesperson I'm advising my clients on both sides of the aisle to be ready to deal, otherwise, a property will sit idle for too long.

The views in this article are by R.Gitonga
May be true but watch out. Lisemwalo Lipo na kama halipo, laja!
 

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Village Elder
#5
Very good article. In my opinion, I would never invest in the real estate from now on ESPECIALLY with the low cost government housing project round the corner.
 

Sakmadic

Village Elder
#6
Very good article. In my opinion, I would never invest in the real estate from now on ESPECIALLY with the low cost government housing project round the corner.
Please tell me uve not fallen for the affordable housing jubilee crap! This won't happen under their watch.
 

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